Markets have been highly volatile lately amid concerns that sticky U.S. inflation increases the prospect of more Federal Reserve rate hikes. Given this situation, Honda Motor Co., Ltd. (HMC), Nokia Oyj (NOK), and Genie Energy Ltd. (GNE) could help investors gain substantial returns on their investments. Let’s take a closer look to get a better understanding of each of these stocks.
Investors’ optimism rose in early 2023 on speculation that high inflation was in the past and that the Federal Reserve would soon back off aggressive rate hikes. However, last month the market struggled to expand on January's momentum following conjecture that the central bank would continue with interest rate hikes.
By looking over the Personal Consumption Expenditures (PCE) report, which exhibits inflation up more than expected in January, the Fed seems far from achieving its target inflation level.
As stocks sputter amid renewed inflation concerns, Wall Street analysts have warned that the stock market's euphoric rally has been nothing more than a head fake.
Morgan Stanley’s (MS) strategist, Michael Wilson, believes that the headwinds for U.S. equities are set to spiral further in March, with stocks coming under pressure from faltering earnings and high valuations. The strategist expects the equities to bottom in the spring, forecasting that the S&P 500 would slide as much as 24% to 3,000 points in the first half of this year.
With the likelihood of a downturn in upcoming months, HMC, NOK, and GNE, with strong fundamentals and robust growth prospects, could be solid additions to one’s portfolio.
Honda Motor Co., Ltd. (HMC)
Headquartered in Tokyo, Japan, HMC produces and sells motorcycles, automobiles, and power products. It also sells spare parts and provides after-sales services directly through retail dealers, independent distributors, and licensees. The company operates through four business segments: Motorcycle; Automobile; Financial service; and Life creation.
On January 13, LG Energy Solution and HMC entered into a JV agreement to produce lithium-ion batteries for electric vehicles. The plant aims to have an annual production capacity of approximately 40GWh. All batteries produced by the new JV would be supplied exclusively to HMC plants in North America to power battery-electric vehicles. This strategic alliance is expected to generate substantial revenues in the upcoming years.
Recently, both companies held the official ground-breaking ceremony for the above joint venture EV battery facility in Fayette County, Ohio.
For the fiscal third quarter that ended on December 31, 2022, HMC’s sales revenue increased 20.3% year-over-year to ¥4.44 trillion ($32.62 billion). Its operating profit rose 22.2% year-over-year to ¥280.40 billion ($2.06 billion), while its profit for the year attributable to owners of the parent came in at ¥244.60 billion ($1.80 billion), up 26.8% from its year-ago period.
HMC’s 0.60x forward EV/Sales is 49.1% lower than the 1.18x industry average. Its 7.44x forward EV/EBITDA is 25% lower than the 9.91x industry average. Also, its forward Price/Sales multiple of 0.35 compares to the industry average of 0.93.
For the fourth quarter (ending March 31, 2023), HMC’s revenue is expected to increase 11.3% year-over-year to $33.36 billion. Its EPS is expected to increase by 13.2% per annum over the next five years. It surpassed the consensus revenue estimates in three of the trailing four quarters, which is impressive.
Over the past three years, the stock’s EBITDA and EBIT grew at CAGRs of 16.9% and 7.6%, respectively. Moreover, its EPS grew at a CAGR of 15.6% over the same period.
Shares of HMC have gained 14.1% year-to-date and 7.9% over the past three months to close the last trading session at $26.09.
HMC’s POWR Ratings reflect this promising outlook. The company has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has an A grade for Value and a B for Stability, Sentiment, and Quality. Among the 61 stocks in the Auto & Vehicle Manufacturers industry, it is ranked #2. To see the other ratings of HMC for Growth and Momentum, click here.
Nokia Oyj (NOK)
NOK offers products and services for radio access networks covering technologies from 2G to 5G and microwave radio links for transport networks. This Finland-based network solution provider operates through four segments: Mobile Networks; Network Infrastructure; Cloud and Network Services; and Nokia Technologies.
On February 26, NOK announced the launch of anyRAN, a revolutionary approach to help mobile operators and enterprises choose purpose-built, hybrid, or Cloud RAN solutions regardless of business model. Through this, the company strengthens partnerships with cloud and data center infrastructure leaders, offering end customer flexibility, and choice in selecting Cloud RAN solutions.
Recently, NOK won a deal with MTN South Africa to deploy its comprehensive AirScale portfolio to modernize and expand MTN’s 5G radio network for superior coverage and capacity. Additionally, it won a new 10-year 5G deal with Antina to enhance the existing 5G network infrastructure throughout Singapore.
Such deals should improve the 5G connectivity experience for businesses and consumers with high bandwidth, ultra-fast speeds, and low latency, driving digitalization and expansion of its footprint across Africa and Singapore.
On February 14, NOK and Kyndryl Holdings, Inc. (KD), the world’s largest IT infrastructure services provider, announced a three-year extension and expansion of their global network and edge partnership, with a focus on developing and delivering industry-leading LTE and 5G private wireless services and Industry 4.0 solutions to customers worldwide.
This expanding, powerful relationship between NOK and KD is anticipated to be a unique combination of vertical and horizontal capabilities, which offers IT, OT, and business leaders access to the innovation, tools, and expert resources they need to transform their operations digitally.
In terms of forward EV/Sales, NOK is trading at 0.81x, 71.4% lower than the industry average of 2.83x. Likewise, its forward EV/EBITDA and Price/Sales multiples of 5.14 and 0.95 are 60% and 65% lower than the industry averages of 12.85 and 2.71, respectively.
Over the past three years, NOK’s net income and EPS grew at 746.8% and 744.3% CAGRs, respectively. Its EBITDA grew at an 11.7% CAGR over the same period.
NOK’s net sales increased 16.1% year-over-year to €7.45 billion ($7.93 billion) in the fourth quarter that ended December 31, 2022. Its operating profit grew 19.2% from the year-ago value to €882 million ($938.25 million). The company’s net profit for the period increased 363.5% year-over-year to €3.15 billion ($3.35 billion), while its EPS rose 366.7% from the prior-year quarter to €0.56.
Analysts expect NOK’s EPS and revenue to increase 10.9% and 9.5% year-over-year to $0.08 and $6.15 billion, respectively, in the fiscal first quarter (ending March 31, 2023). It surpassed the EPS estimates in three of the trailing four quarters. NOK has gained marginally year-to-date to close the last trading session at $4.68.
It is no surprise that NOK has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. It has an A grade for Value and a B for Growth. Within the B-rated Technology - Communication/Networking industry, it is ranked #4 of 49 stocks.
In addition to the POWR Ratings I’ve just highlighted, you can see the NOK ratings for Momentum, Stability, Sentiment, and Quality, here.
Genie Energy Ltd. (GNE)
GNE and its subsidiaries supply electricity and natural gas to residential and small business customers internationally. It has three operational segments: Genie Retail Energy (GRE); GRE International; and Genie Renewables.
Last year in November, the company acquired a portfolio of residential and small commercial customer contracts from Mega Energy. This acquisition is backed by its strong cash flows and should enable GNE to expand its footprint across seven states of retail supply markets.
For the fiscal third quarter that ended September 30, 2022, GNE’s gross profit increased 24.7% year-over-year to $43.14 million. The company’s income from operations rose 34.8% year-over-year to $23.54 million, while its adjusted EBITDA increased 35.3% from the year-ago value to $24.50 million.
Also, its net income attributable to common stockholders came in at $18.31 million compared to a net loss of $2.66 million in the prior-year period. In addition, its EPS stood at $0.70 compared to a net loss per share of $0.10 in the same quarter last year.
In terms of trailing 12-month EV/Sales, GNE is currently trading at 0.66x, 83.2% lower than the industry average of 3.93x. Its trailing 12-month EV/EBITDA multiple of 2.48 is 80.4% lower than the industry average of 12.68. In addition, its trailing 12-month EV/EBIT multiple of 2.52 is 88.6% lower than the industry average of 22.16x.
GNE’s EBITDA and EBIT grew at CAGRs of 120.2% and 156.4%, respectively, over the past three years. Moreover, its net income grew at a CAGR of 81.9% over the same period.
The stock has gained 102% over the past year to close the last trading session at $11.98.
GNE's strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, translating to a Strong Buy in our proprietary rating system.
It also has an A grade for Value and a B for Growth and Momentum. Out of 64 stocks in the Utilities - Domestic industry, it is ranked first. To see GNE’s ratings for Stability, Sentiment, and Quality, click here.
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HMC shares were unchanged in premarket trading Friday. Year-to-date, HMC has gained 14.13%, versus a 4.02% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.
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